Potential merger with a competitor
May 13, 2024
by a searcher in San Francisco, CA, USA
Hello,
A year ago, I purchased the B2B business using an SBA loan. Since then, we have increased our prices and acquired new customers. Additionally, we hired a seasoned General Manager from the industry to oversee operations.
Currently, we are exploring an opportunity to merge with a competitor or execute a buyout to achieve operational synergy, expand into new markets, and establish ourselves as a major player in the region.
Deal size is around ~2mil.
I would prefer to pay off the SBA loan, I am open to considering equity in the combined entity, seller financing, or a combination of both. I am curious to explore how we can accomplish this, and whether funding can be secured through SBA or conventional means.
If anyone has experience navigating a similar path, I would greatly appreciate hearing about your insights and lessons learned. Thank you in advance for sharing your experiences.
Thank you in advance.
from University of Notre Dame in New York, NY, USA
1. Who is the "target" here and who will be the surviving entity (or ultimate parent if you're accomplishing the merger through a merger-sub)?
2. Structure matters and stock swap transactions are taxed (unless you have a reverse triangular structure and 80% of the transaction consideration is stock, rather than cash, in which case the stock swap will be tax-free).
3. Most merger consideration is stock for stock, with a smaller cash consideration piece - you need sophisticated advisors to ensure that your balancing the "cash piece" with favorable tax treatment.
4. If you don't pay off your SBA loan before closing, your SBA lender would likely need to consent to the merger. Additionally they'd require subordination agreements to any type of seller note in connection with that transaction - so definitely easier to pay off the SBA loan before closing.
I have a fair amount of mergers on my deal sheet, so happy to chat. Feel free to DM me or shoot me an email redacted
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA